Risky Business

“New Modes of Profit” brought together four practitioners who have diversified their architectural business practices to reap more rewards, or was it risk?

In the third of the series “Dialogues from the Edge of Practice,” AIANY 2015 President Tomas Rossant, AIA, provoked the speakers and audience by comparing Alberti “the delineator” (theory) to Brunelleschi “the maker” (practice). Both expanded the field of architecture, one by showing what could be done and the other by doing it. Their innovations in practice, Rossant claimed, show that “business should be seen as a design problem.”

Autodesk’s Philip Bernstein, FAIA, RIBA, LEED AP, who teaches at Yale University, compared architects, doctors, and lawyers as a percentage of population and annual earnings; architects were noticeably lower in both. To rectify this supply-demand imbalance, he challenges his students to use new tools and technologies to identify different business models and value propositions. Whether design-build, CM at risk, public-private partnerships (P3), or integrated project delivery (IPD), these business models attempt to increase profit by mending architecture’s schism between practice and theory. “More profit needs more revenue,” he said, and to achieve that, Bernstein recommends increasing scope, getting paid on goals, expanding construction services, adding services affecting buildings’ behaviors, and providing post-occupancy services.

Thomas Gluck’s firm Gluck+ implements a design-build model that allows the firm to experiment and to change the design through construction. It also allows Gluck+ “to avoid the evasion of liability and responsibility” – that is, reduce the fear of lawsuits – and to increase the exchange of information that allows innovation and successful projects.

Using a golf metaphor, Jane Smith, AIA, IIDA, founder of Spacesmith, explained that the role of the architect is that of a trusted advisor and designers, clients, and other allied professionals have to work together to achieve success. By displaying expertise and listening to clients’ needs, one can develop a holistic design solution and a trust where clients can see the increased value of the relationship. This helps one escape the merely quantitative baseline comparison of dollars per square foot.

By bringing together client, designer, and contractor, AJ Pires, a partner at Alloy Development, has developed a business model “that can access value above the average.” The practice initiates a development plan, designs the project, accesses the value as a broker, and assesses risk and value as the builder. However, Pires cautioned that one must “know when to pull back because risk is the key linchpin.”

“What can we do,” Rossant asked, “to accelerate the role of architecture to expand value?” Gluck pointed out that architects have been doing less to avoid risk, but assuming more scope and service, i.e. risk will increase profit. Pires concurred that architects need to absorb more scope, risk, and business. Smith recognized that business classes are a fundamental missing piece of an architect’s education, and that time is money, which cannot be given away as part of the design process. Bernstein concluded that each of the panelists was conflating traditionally separate roles, converting added services to fees, or assuming more risk.

Though architecture has the highest risk for the least reward, and taking more risk yields more profit, Gluck revealed his “risk insurance is much less because the business model is based on getting it right.” Confirming that more risk is more productive, Pires countered, “We have a lot of insurance.” Ultimately, Smith assured that increased profit results from defining broader services, proving the added value, and charging for it.

James Way, Assoc. AIA, Marketing Manager at Morris Adjmi Architects, frequently contributes to eOculus.

Event: Edge Business: New Modes of Profit
Location: Center for Architecture, 03.30.15
Speakers: Phil Bernstein, FAIA, RIBA, LEED AP, Vice President, Building Industry Strategy & Relations, Autodesk; Thomas Gluck, Principal, GLUCK+; AJ Pires, Partner and Executive Vice President, Alloy Development; Jane Smith, AIA, IIDA, Founding Partner, Spacesmith, and AIANY Vice President for Professional Development; Tomas Rossant, AIA, 2015 AIANY President (moderator)